Indian bonds firmed on Monday following the Reserve Bank of India's decision to maintain foreign portfolio investment limits unchanged for 2026-27. According to The Economic Times, the benchmark 6.48% 2035 bond yield slipped to 7.1149% at 11:00 a.m. IST against 7.1329% on Thursday, marking a reversal after rising for 12 straight sessions. The yield eased after reaching its highest level in nearly two years, with bond yields moving inversely to prices. The market anticipates interest rates will remain unchanged, with the RBI expected to maintain its neutral stance at the upcoming monetary policy decision on Wednesday. Recent market data shows FIIs sold equities worth ₹7,839 crore (NSE) and ₹8,167 crore (combined exchanges) on April 6, 2026, while DIIs bought equities worth ₹7,950 crore (NSE) and ₹8,088 crore (combined exchanges)**, highlighting the ongoing divergence between foreign and domestic institutional investor sentiment.
The Reserve Bank of India announced on Monday that the investment limit for foreign portfolio investors in government securities through the general route will remain unchanged at 6 per cent of the outstanding stocks of securities for 2026-27. According to Upstox News Desk, the allocation of incremental changes in the G-Sec limit (in absolute terms) over the two sub-categories -- General and Long-term -- has been retained at 50:50 for 2026-27. The RBI stated that the limits for FPI investment in Government Securities (G-Secs), State Government Securities (SGSs), and corporate bonds shall remain unchanged at 6 per cent, 2 per cent and 15 per cent respectively of the outstanding stocks of securities for 2026-27 for the General Route. However, in a significant development, the total FPI investment limit in debt has been increased from ₹14,70,655 crore currently to ₹15,51,646 crore for the first half of FY27 (April-September 2026) and further to ₹16,32,640 crore for the second half (October 2026-March 2027).
The revised limits show substantial increases across all categories. G-Sec General category will increase from ₹2,89,488 crore to ₹3,04,003 crore by the second half of FY27, while G-Sec Long-term limits will rise from ₹1,58,488 crore to ₹1,73,003 crore. Similarly, SGS General limits will increase from ₹1,34,744 crore to ₹1,57,142 crore, while SGS Long-term limits remain unchanged at ₹7,100 crore. Corporate bond limits will also see a rise from ₹8,80,835 crore to ₹9,91,392 crore during the same period. According to Moneycontrol, these higher overall limits aim to bring in more capital, improve liquidity in bond markets, and support government borrowing at stable interest rates.
The aggregate limit of the notional amount of credit default swaps sold by FPIs will be 5 per cent of the outstanding stock of corporate bonds, as reported by The Economic Times. Accordingly, an additional limit of ₹3,30,464 crore has been specified for 2026-27. The entire increase in limits for SGSs (in absolute terms) has been added to the 'General' sub-category of SGSs, with all investments by eligible investors in the 'specified securities' to be reckoned under the Fully Accessible Route (FAR).
With effect from April 01, 2026, all existing and future investments under the Voluntary Retention Route will be subject to the investment limits stipulated for FPI investments under the General Route, according to The Economic Times. As hitherto, all investments by eligible investors in the 'specified securities' shall be reckoned under the Fully Accessible Route (FAR). The RBI's circular on limits for investment in debt and sale of credit default swaps by foreign portfolio investors provides comprehensive guidelines for foreign investment in Indian debt markets. The central bank has also withdrawn its earlier circular dated April 3, 2025, which had specified the limits for FY26, indicating a complete reset of the framework.
